China Racing Ahead of U.S. in the
Drive to Go Solar

Suntech, China’s biggest solar
panel maker, has reduced the price of panels sold
in America to build market share. Photo credit:
Ryan Pyle for The New York Times

WUXI, China — President Obama wants to make the United
States “the world’s leading exporter of renewable
energy,” but in his seven months in office, it is
China that has stepped on the gas in an effort to
become the dominant player in green energy — especially
in solar
power, and even in the United States.

Chinese companies have already played a leading role
in pushing down the price of solar panels by almost
half over the last year. Shi Zhengrong, the chief
executive and founder of China’s biggest solar panel
manufacturer, Suntech Power Holdings, said in an interview
here that Suntech, to build market share, is selling
solar panels on the American market for less than
the cost of the materials, assembly and shipping.

China's Solar Share

Backed by lavish government support, the Chinese
are preparing to build plants to assemble their products
in the United States to bypass protectionist
legislation. As Japanese automakers did decades
ago, Chinese solar companies are encouraging their
United States executives to join industry trade groups
to tamp down anti-Chinese sentiment before it takes
root.

The Obama administration is determined to help the
American industry. The energy and Treasury departments
announced this month that they would give $2.3 billion
in tax credits to clean energy equipment manufacturers.
But even in the solar industry, many worry that Western
companies may have fragile prospects when competing
with Chinese companies that have cheap loans, electricity
and labor, paying recent college graduates in engineering
$7,000 a year.

“I don’t see Europe or the United States becoming
major producers of solar products — they’ll be consumers,”
said Thomas M. Zarrella, the chief executive of GT
Solar International, a company in Merrimack, N.H.,
that sells specialized factory equipment to solar
panel makers around the world.

Since March, Chinese governments at the national,
provincial and even local level have been competing
with one another to offer solar companies ever more
generous subsidies, including free land, and cash
for research and development. State-owned banks are
flooding the industry with loans at considerably lower
interest rates than available in Europe or the United
States.

Suntech, based here in Wuxi, is on track this year
to pass Q-Cells of Germany, to become the world’s
second-largest supplier of photovoltaic cells, which
would put it behind only First Solar in Tempe, Ariz.

Hot on Suntech’s heels is a growing list of Chinese
corporations backed by entrepreneurs, local governments
and even the Chinese military, all seeking to capitalize
on an industry deemed crucial by China’s top leadership.

Dr. Shi pointed out that other governments, including
in the United States, also assist clean energy industries,
including with factory construction incentives.

China’s commitment to solar energy is unlikely to
make a difference soon to global warming. China’s
energy consumption is growing faster than any other
country’s, though the United States consumes more
today. Beijing’s aim is to generate 20,000 megawatts
of solar energy by 2020 — or less than half the capacity
of coal-fired power plants that are built in China
each year.

Solar energy remains far more expensive to generate
than energy from coal, oil, natural gas or even wind.
But in addition to heavy Chinese investment and low
Chinese costs, the global economic downturn and a
decline in European subsidies to buy panels have lowered
prices.

The American economic stimulus plan requires any
project receiving money to use steel and other construction
materials, including solar panels, from countries
that have signed the World Trade Organization’s agreement
on free trade in government procurement. China has
not.

In response to this, and to reduce shipping costs,
Suntech plans to announce in the next month or two
that it will build a solar panel assembly plant in
the United States, said Steven Chan, its president
for global sales and marketing.

“It’ll be to facilitate sales — ‘buy American’ and
things like that,” Mr. Chan said, adding that the
factory would have 75 to 150 workers and be located
in Phoenix, or somewhere in Texas.

But 90 percent of the workers at the $30 million
factory will be blue-collar laborers, welding together
panels from solar wafers made in China, Dr. Shi said.

Yingli Solar, another large Chinese manufacturer,
said on Thursday that it also had a “preliminary plan”
to assemble panels in the United States.

Western rivals, meanwhile, are struggling. Q-Cells
of Germany announced last week that it would lay off
500 of its 2,600 employees because of declining sales.
It and two other German companies, Conergy and SolarWorld,
are particularly indignant that German subsidies were
the main source of demand for solar panels until recently.

“Politicians might ask whether this is still the
right way to do this, German taxpayers paying for
Asian products,” said Markus Wieser, a Q-Cells spokesman.

But organizing resistance to Chinese exports could
be difficult, particularly as Chinese discounting
makes green energy more affordable.

Even with Suntech acknowledging that it sells below
the marginal cost of producing each additional solar
panel — that is, the cost after administrative and
development costs are subtracted — any antidumping
case, in the United States, for example, would have
to show that American companies were losing money
as a result.

First Solar — the solar leader, in Tempe — using
a different technology from many solar panel manufacturers,
is actually profitable, while the new tax credits
now becoming available may help other companies.

Even organizing a united American response to Chinese
exports could be difficult. Suntech has encouraged
executives at its United States operations to take
the top posts at the two main American industry groups,
partly to make sure that these groups do not rally
opposition to imports, Dr. Shi said.

The efforts of Detroit automakers to win protection
from Japanese competition in the 1980s were weakened
by the presence of Honda in their main trade group;
they expelled Honda in 1992.

Some analysts are less pessimistic about the prospects
for solar panel manufacturers in the West. Joonki
Song, a partner at Photon Consulting in Boston, said
that while large Chinese solar panel manufacturers
are gaining market share, smaller ones have been struggling.

Mr. Zarrella of GT Solar said that Western providers
of factory equipment for solar panel manufacturers
would remain competitive, and Dr. Shi said that German
equipment providers “have made a lot of money, tons
of money.”

The Chinese government is requiring that 80 percent
of the equipment for China’s first municipal power
plant to use solar energy, to be built in Dunhuang
in northwestern China next year, be made in China.

Dr. Shi said his company would try to prevent similar
rules in any future projects.

The reason is clear: almost 98 percent of Suntech’s
production goes overseas.